This coming Thursday, I’ll give a talk about Preparing Difficult Witnesses for Trial at the University of Texas law school Civil Litigation Conference in Austin. My series of posts on the subject ends with this one — and it’s the best one of them all, in my view.

Draft the hardest questions (HQs) memo.

Every case turns on a discrete number of tough-to-answer questions. If you thought your business partner cheated you in the Permian Basin deal, why did you turn around and do a Bakken shale deal with him? You knew about an article in Widgets Today! on a new widget design when you applied for a patent on a similar widget improvement, but didn’t disclose it. Why not? Do you really expect us to believe that you met in a back room for three hours with your competitors but didn’t talk about the price increases you all announced the next week?

Your DW will have answers to the HQs, whatever they are, but do you want to first learn them when he takes the stand, perhaps under your opposing-counsel friend’s cross-examination?

No. Your most important and challenging jobs in preparing the DW are to identify these HQs and with his help to figure out the truthful answers that most effectively present your client’s side of the case.

A trial lawyer’s ability to perform this crucial function separates the stars from the also-rans. You will not waste time working on getting it right.

It’s essential that HQs memo reflect the DW’s best, most accurate, and honest recollection of the facts. That is why you must do a thorough interview of the DW and use your faithful recording of her answers in your notes to make a first draft of the memo. To make the point obvious, the memo itself should expressly state, at the outset, that it is simply a draft and is subject to revision as necessary to make it fully accurate.

You can show the HQs memo to the DW if you represent him. The lawyer-client privilege will generally protect it from discovery. The exception for documents that refresh a witness’s recollection shouldn’t apply, not least because it reflects the DW’s recollection.

For any DWs that you don’t have a lawyer-client relationship with, sharing a copy of an HQs memo may risk having it fall into the hands of your friend on the other side. The DW herself may turn over a copy, or you may have to produce it as a relevant but non-privileged document. Although you still should review its contents with the non-client DW to assure its accuracy, the better practice is to do it orally.

Do dry runs.

One article sums up the “practical literature” on witness prep as deeming “the failure to interview witnesses prior to testimony” to constitute “a combination of strategic lunacy and gross negligence.” Witness Preparation, 68 Tex. L. Rev. at 287 (footnote omitted). Almost two decades later, you can say almost the same thing about failing to walk a DW through his trial testimony at least once.

Indeed, the DW needs a good preview of his turn in the witness box more than other witnesses do. Only in that way can you spot issues that could upend the DW’s ability to communicate with the jury truthfully and effectively.

The concerns that make dry runs highly advisable for DWs fall generally into two categories. Let’s call them style and substance.

Style encompasses all the traits that enable a witness to provide testimony that the jury finds persuasive. These include confidence, firmness, tone and volume, consistency, courtesy, engagement with the jury, and candor.

Some people exhibit these virtues effortlessly. DWs generally don’t. Yet many are blissfully unaware of their shortcomings. By doing dry runs with them, you will allow them to observe behavior that can detract from effective communication for themselves.

Take the DW who doesn’t respond to the question. You ask him if he has a watch, and he looks at the timepiece on his wrist and, instead of saying Yes tells you It’s half past two and goes on to describe why he likes Rolexes better than Breitlings and how he thinks the Apple Watch costs more than it should. A couple of instances of asking him Do you remember the question? can go a long way towards curing him of not carefully listening to the question and answering it.

What about the shy DW with the quiet voice? Get her to speak up. Assure her that the jury wants to hear what she has to say. Let her practice using more volume in her answers to your questions.

The know-it-all DW also benefits from feedback on what comes across to others at best as arrogance and at worst as pompous ignorance.

Nor should you neglect cross-examination. The most believable witnesses don’t change their demeanor between direct and cross, but that sort of consistency may not come naturally for your DW. The DW also may lose focus, get angry, or fall into traps unless he has gone through it with you and seen how he can avoid making the same mistakes at trial.

Videotaping questions and answers and then critiquing the DW’s performance can work wonders and is the single most effective way to prepare the DW to testify at trial.[1] People generally – a group that includes DWs – get a bit of a shock when they see themselves on the screen. Being so accustomed to observing themselves only from inside their heads, they may have a highly distorted sense of the impression they make visually and, to a lesser extent, aurally.

Most DWs get a little better after one video review, but they really shine in the third iteration. The first one allows them to make some adjustments, and the second reveals how they over-adjusted or misadjusted. Diminishing returns begin to set in after number three.

Note that, because this aspect of prep concerns technique rather than substance, the questions you ask don’t matter all that much. You may in fact want to ask about things that have nothing to do with the case.

It’s often useful to expose the DW to a variety of cross-examination styles. You may not know who’ll do the actual cross at trial, and the different approaches, manner, and pacing of your colleagues will help assure that, whatever the cross style, the DW will be better able to adjust without discombobulation.

The second category – substance – requires you to bear in mind the ethical constraints on evidence lawyers may sponsor. See Tex. Disc. R. Prof. Conduct 3.3.[2] The goal of review with the DW here relates to getting factual details right. Videotaping has less utility here, but still it’s usually helpful to the DW to see herself grappling with matters of substance and gaining confidence in her ability to get the thrust of her testimony across effectively.

Maintain a safe distance.

Before ending, let me remind you of a few notes of caution.

The overriding goal of preparing DWs to testify at trial is to effectively present a truthful story that will motivate jurors to find in your client’s favor. Make clear that you and your client want only honest and accurate testimony.

Be aware of the scope and limits of the lawyer-client privilege and the lawyer work-product doctrine. The former will protect essentially all of your communications with your DW client, notably including meetings, conversations, emails, memos, and videos concerning the DW client’s preparation to testify at trial.

The work-product doctrine confers less sweeping protection. Although it may extend to communications about trial preparation with non-client DWs, who may include former employees of your client or its adversary as well as expert witnesses, its efficacy is less certain. That is in part because the doctrine has formal exceptions, in part because it hardly operates at all in the context of testifying experts, and in part because it to some extent depends on the willingness of non-client DWs to maintain confidentiality.

Conclusion

You and I are lucky to be trial lawyers. Our niche in the legal profession calls on us to use all our skills, smarts, and resourcefulness to tell a true story that persuades jurors to find in our clients’ favor. The suggestions I’ve made here for preparing DWs to tell their parts of the story provide tools for you to help them become effective witnesses. Happy trials!

____________________

[1] It is common practice to promptly reuse media after each video session.

(2) fail to disclose a fact to a tribunal when disclosure is necessary to avoid assisting a criminal or fraudulent act;

(3) in an ex parte proceeding, fail to disclose to the tribunal an unprivileged fact which the lawyer reasonably believes should be known by that entity for it to make an informed decision;

(4) fail to disclose to the tribunal authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel; or

(5) offer or use evidence that the lawyer knows to be false.

(b) If a lawyer has offered material evidence and comes to know of its falsity, the lawyer shall make a good faith effort to persuade the client to authorize the lawyer to correct or withdraw the false evidence. If such efforts are unsuccessful, the lawyer shall take reasonable remedial measures, including disclosure of the true facts.

(c) The duties stated in paragraph (a) and (b) continue until remedial legal measures are no longer reasonably possible.

Tex. Disc. R. Prof. Con. 3.3.

]]>https://www.thecontingency.com/2017/10/preparing-difficult-witnesses-for-trial-hardest-questions-dry-runs-keeping-a-safe-distance-and-conclusion/feed/0https://www.thecontingency.com/2017/10/preparing-difficult-witnesses-for-trial-hardest-questions-dry-runs-keeping-a-safe-distance-and-conclusion/Preparing difficult witnesses for trial: Story of me, full interview, and explaining what matters and whyhttp://feeds.lexblog.com/~r/TheContingency/~3/0yXuG0-SyKA/
https://www.thecontingency.com/2017/10/preparing-difficult-witnesses-for-trial-the-story-of-me-a-full-interview-and-explaining-what-matters-and-why/#respondFri, 27 Oct 2017 05:03:38 +0000http://www.thecontingency.com/?p=7287Continue Reading]]>In this penultimate installment of my series on preparing difficult witnesses (DWs) for trial, we get to some of the real nitty-gritty: Learning the story of me, doing a full interview, and then explaining what matters and why. As will become clear, the sequence matters — a lot.

Learn the DW’s story of me.

People love to talk about themselves, but they seldom get to. Asking the DW to tell you her story allows her to scratch that itch, producing happiness.

I’ve had DWs who you’d think had no one to talk to. They would start talking fast because the freedom to go on about their favorite subject while someone else listened attentively felt unfamiliar. But boy do they like it!

For our purposes, the main point is to get the DW to relax a bit. But you should also pay close attention. You will probably learn personal details that you can use to humanize the DW with the jury. One of my dearest clients grew up in a small Italian town, worked in a movie theater there as a boy, and took a food service job on a cruise ship before emigrating to Dallas with his sweetheart and becoming one of the most successful restaurateurs in Texas. In another case, a distinguished MIT professor of computer science spent a month with his wife cycling across the United States.

This phase of the prep need not take long. It rarely lasts more than 15 minutes. It starts with where the DW was born, where he grew up, and where he went to high school and then shifts to college, family, and work before getting to his involvement in the facts underlying the case. Just remember: you are establishing rapport while digging for gold.

Do a full interview

Now you’ve completed all your homework. You’ve studied the pleadings; re-read the chronology of events and cast of characters; consulted the relevant treatises, case law, statutes, and Bill of Rights provisions; reviewed the jury questions; spent quality time with the key case documents and any prior statements by your DW; surveyed his digital footprint on social media; and checked his litigation history. You’ve also taken him through his confidence-building story of me. Here begins the real fun.

Judge Robert Keeton wrote, in his authoritative Trial Tactics and Methods, that “if you prepare your case properly you will not call a witness to the stand without having asked the witness what his testimony will be on all points as to which you can anticipate he may be questioned.” Your thorough interview of the DW will – along with the materials you’ve assembled – provide the raw material.

The DW’s story of me will naturally segue into her involvement in the underlying facts. Go chronologically. The interview will now begin to slow down as details emerge. Take time to pause on particulars of important meetings and other events. Ask non-leading questions to keep the DW’s narrative moving forward in temporal sequence.

Strive to keep it factual, and let the story come out as straightforwardly as possible. Avoid any talk about claims and defenses. That will come soon enough. In fact, talk as little as possible. Keep the spotlight on the DW’s description of the facts.

Take notes. Really good ones, preferably in Word so you can share them with colleagues. You’ll need them later, not least for when you prepare the first draft of the Hardest Questions memo

Explain what matters and why.

Many DWs will have a vague idea of what the case involves legally. Without a good grasp of the claims and defenses, your DW will not understand the purpose behind your questions on direct or the thrust of your opposing friend’s cross-examination. Give your DW a basic grounding. But make sure not to do it until after the full initial interview. You want to avoid any risk that the legal consequences of the facts might affect the DW’s recollection of them.

Once I defended a big defense contractor against a claim that it had poached a competitor’s employees in order to gain business at the competitor’s expense. The competitor alleged theft of trade secrets, but they had a thin case there. What they really were trying to do, I thought, was simply to prevent the former employees from using their skills to benefit my client.

At the hearing on the competitor’s request for a temporary injunction, we used big boards to blow up parts of the employment agreements for the judge to see. I asked the ex-employees about the contract provisions but added a question about whether the agreements included a non-compete. After the presentation of evidence ended, I argued that the competitor could not win a temporary injunction unless it had a non-compete. Pointing to one of the big boards, I said I would show the court the full text of the competitor’s non-compete. Then I flipped the board over in its easel to display the back side – a perfect blank.

Don’t get cute, though. Make sure that your reviewing of the case’s legal underpinnings aims to enhance the witness’s ability to give truthful testimony, not to skew it one way or another. See Witness Preparation, 68 Tex. L. Rev. at 300-04.

]]>https://www.thecontingency.com/2017/10/preparing-difficult-witnesses-for-trial-the-story-of-me-a-full-interview-and-explaining-what-matters-and-why/feed/0https://www.thecontingency.com/2017/10/preparing-difficult-witnesses-for-trial-the-story-of-me-a-full-interview-and-explaining-what-matters-and-why/Preparing Difficult Witnesses for Trial — Part 3http://feeds.lexblog.com/~r/TheContingency/~3/5INiwaOz4to/
https://www.thecontingency.com/2017/10/preparing-difficult-witnesses-for-trial-part-3/#respondMon, 23 Oct 2017 05:01:44 +0000http://www.thecontingency.com/?p=7284Continue Reading]]>In Part 3 of our Preparing Difficult Witnesses for Trial series (see Part 1 and Part 2), we study a key aspect of trial-team dynamics and the necessity of getting face-to-face with difficult witnesses (DWs).

Include a non-lawyer on the trial team.

My firm, Susman Godfrey, assembles a unique trial team for each case. We don’t assign associates or paralegals to partners. The typical trial team also combines lawyers from two or more of our four offices (in Houston, Los Angeles, New York, and Seattle). Partly as a result of the geographic spread of team members, we hold trial team calls, generally on a weekly basis, to talk about task assignments, case developments, strategic issues, and other matters. The calls seldom last more than 20 to 30 minutes, but they almost always include the individual client or representatives of an organizational client.

I’ve found over the years that, for corporate clients, the trial team benefits enormously from having both an in-house lawyer and a business person receive the weekly task assignments memo and participate in the weekly calls. The combination engages both the client’s legal department and its executive management – two groups that don’t always communicate optimally. The manager, who typically finds the process eye-opening, has the ability to access resources that enable the trial team to function more nimbly, smoothly, and effectively.

What does that have to do with preparing DWs? Sometimes, bringing an executive into the trial team prevents him or her – who usually had some involvement in the events underlying the dispute – from becoming a DW. More often, he or she can direct others within the organization to give trial preparation a high priority. You will find that quality especially useful at crunch time! And non-lawyer executives often bring industry-specific knowledge, experience, and perspectives that a team of legal professionals may lack.

Note that it’s essential to have buy-in from the legal department. I’ve experienced delays with clients who are unfamiliar with having a business person as an active trial team member from early in a case. But persistence pays off, particularly if you stress that the main line between outside counsel and management will continue to run through your in-house boss.

Meet

You also can’t fully prepare a DW unless you spend time with him or her. All of the suggestions I make below work far better – and perhaps only – if you meet in person.

Also, you must do it more than once. Indeed, depending on how difficult the DW is, you may need more than two face-to-faces. You’ll need several hours each time.

The need for spending time with the DW in the flesh may seem obvious, but let’s explore the reasons anyway. First come the visual cues you and the DW send and receive. You’ll understand the DW better, and she’ll get more of what you need to convey, if you interact in physical space rather than by phone or – God forbid – via keyboard.

You must size up the DW, too. Does he strike you as trustworthy? Can you believe what he tells you? Is he hiding something? You’ll likely have to do some friendly cross-examination to get at the truth. Even Clarence Darrow couldn’t do that consistently if he didn’t have the DW in sight.

Nor should you discount the importance of bonding. You must maintain objectivity and a professional distance, but that doesn’t require cold-fish treatment. Impress on the DW your fervent wish that she will do a splendid job convincing the jury of the true facts she has personal knowledge of. Stress that your role is to help her communicate the truth effectively and avoid errors and snares that might interfere with doing that. “Whether or not a witness has a stake in the outcome of the case, a lawyer should protect the witness from appearing unnecessarily dishonest, venal, incompetent, graceless, or unintelligent.” Witness Preparation, 68 Tex. L. Rev. at 288-89.

The question of venue arises. Lawyers prefer to meet with witnesses in their offices for reasons of personal convenience and availability of colleagues, documents, conference rooms, and support. Those things count for something with all witnesses, including DWs, but the crucial consideration with the DW is the greater likelihood that you will get the DW’s full attention.

Distractions for the DW abound on the DW’s home turf. That goes especially for executives and other alpha characters, who excel at finding ways to get others to do what they want. Plus you feel off-balance there and hardly in control. Avoid the DW’s offices. Choose a neutral location if for some reason – such as an out of town trial – you can’t meet at your place.

A meeting-by-phone provides a poor substitute for the in-person kind. Do all you reasonably can to avoid the former. But if you must conduct one of your meetings with the DW remotely, at least use a videoconferencing service such as Skype.

* * * *

In Part 4: the story of me and conducting a full interview.

]]>https://www.thecontingency.com/2017/10/preparing-difficult-witnesses-for-trial-part-3/feed/0https://www.thecontingency.com/2017/10/preparing-difficult-witnesses-for-trial-part-3/Preparing Difficult Witnesses for Trial — Part 2http://feeds.lexblog.com/~r/TheContingency/~3/XLuDEmzZKDU/
https://www.thecontingency.com/2017/10/preparing-difficult-witnesses-for-trial-part-2/#respondThu, 19 Oct 2017 05:02:40 +0000http://www.thecontingency.com/?p=7279Continue Reading]]>In Preparing Difficult Witnesses for Trial — Part 1, we looked at the four major types of trial witnesses. We also sketched “some of the more significant ethical considerations that govern your dealings with each category”. We then took “a short and non-exhaustive look at the two major privileges that trial lawyers deal with: the lawyer-client privilege and the lawyer work-product doctrine.”

In this post, we’ll cover the necessity for getting really ready and something you may find surprising — the importance of caring.

Get ready. Really ready.

One of my law partners liked to say that he’s never seen a bad witness, but he has observed a lot of lazy lawyers.

He had a point.

To start with the obvious, you can’t get a difficult witness — a DW — ready to face a jury (and your friend on the other side) unless you know the case inside and out. That begins with absorbing the pleadings, mastering the law governing the claims and defenses, and (last but not least) writing out the fact questions the jury will answer. Only then will you have the bones on which you will flesh out the story of the case.

Don’t even think about stopping there. You must also absorb the chronology, learn the cast of characters, and become as one with the most important documents (which in even the most complex case seldom number more than 20).

And you need to gather from your case file and study each email, letter, journal entry, hearing and deposition transcript, and interrogatory answer that mentions the witness. And yes, you must survey the witness’s social media presence and litigation history. Others can look for the tweets, Facebook posts, Yelp reviews, YouTube videos, and LinkedIn profiles and research PACER, Westlaw, Lexis, and Google. But you need to examine the results.

At this point, you may wonder why I’ve started by telling you things you think you already know. I have two answers.

First, the fact that you know you should do something doesn’t mean you will really do it when the time comes. Recall that we have before us the task of preparing DWs for trial. By definition, you face a challenge, and that puts a premium on actually doing what you know you should do but sometimes dispense with doing because (you think) it won’t matter. You need me to remind you of the high stakes and the small margin for error.

Second, thorough preparation gives you something few people have but you will need if you hope to tame a DW – gravitas. It does that because doing the work shows unmistakable respect for the process and establishes you as a serious person. It thus grants you authority on matters of fact and opinion. You will need that and more with a DW, so don’t scrimp on preparation.

Care.

Do you see yourself as an advocate who presses your clients’ interests for money? Do you think you have to put your values and beliefs on hold to put your client first?

I sure hope not. Your job as trial lawyer gives you a tremendous opportunity to embody the high ethical standards of the legal profession. That visible integrity makes you worthy of belief and therefore believable. Credibility matters more than almost anything else with judges and juries!

But you need to care. I don’t mean the kind of caring that acting coaches bring out in their students – “Once you learn to fake authenticity, everything else is easy.” In each case, you should find someone, or something, that engages you.

Over three decades of practice, I’ve made friends with executives, lawyers, and employees I worked with. The co-founder of a start-up software company teamed up with me in a local tennis tournament before he took the company public and bought a professional sports team. A farmer faced loss of his farm and livelihood at the hands of a smug supplier who sued him for all he had after crop prices plunged. Concern and personal regard for both helped motivate me to do my best.

Sometimes the principles at stake alone will impel you. Nobody likes a bully, right? Several years ago, a big telecom company tried to crush a tiny rival (my client) with an injunction, partly out of spite. In another, a software vendor played lawsuit gotcha with a licensee (my client). Neither got the hundreds of millions they claimed, both in fact paid money to my clients, the defendants.

Witnesses, including DWs, pick up on your passion, or lack of it. Showing them that you care about the case, about them, or (preferably) about both will make you more effective.

* * * *

Our next post will address including a non-lawyer on your team and meeting with the DW.

]]>https://www.thecontingency.com/2017/10/preparing-difficult-witnesses-for-trial-part-2/feed/0https://www.thecontingency.com/2017/10/preparing-difficult-witnesses-for-trial-part-2/Preparing Difficult Witnesses for Trial — Part 1http://feeds.lexblog.com/~r/TheContingency/~3/qUmG5A1Pxtw/
https://www.thecontingency.com/2017/10/preparing-difficult-witnesses-for-trial-part-1/#respondMon, 16 Oct 2017 05:01:34 +0000http://www.thecontingency.com/?p=7275Continue Reading]]>For your client to win at trial, the trial lawyer in you must tell a human story, one that moves jurors to decide in your client’s favor. Flesh-and-blood witnesses fill essential roles in the drama. So-so ones will turn the story to mush, and bad ones will allow your friend on the other side to beat you and your client about the head and neck with it. Difficult witnesses – DWs – therefore pose a risk you must use all your talents and powers to manage.

How can you prepare DWs for their potentially pivotal turn on the courtroom stage? In this series of posts, I offer thoughts from 33 years of trying cases.

Prologue

Let’s start with some basics. I’ll begin by briefly sketching the identifying traits of the groups that essentially all witnesses – including DWs – fall into and some of the more significant ethical considerations that govern your dealings with each category. Then we’ll take a short and non-exhaustive look at the protective scope of the two major privileges that trial lawyers deal with: the lawyer-client privilege and the lawyer work-product doctrine.

Witness types and some ethical rules.

A civil case generally involves four categories of witnesses:

your client,

the clients of other lawyers,

non-parties who don’t have legal counsel, and

experts

Note the emphasis on who has a lawyer and who doesn’t. It matters for several reasons

First, the lawyer-client privilege normally protects your interactions with witnesses who are clients – whether individual clients or the representatives of an organizational client such as a corporation.[1]

Second, your dealings with non-client witnesses, including experts, generally do not fall within the protection of the lawyer-client privilege, although the work-product doctrine may still apply.

Third, although communications with your client’s employees may fall within the protection of a privilege, you don’t necessarily represent them as individuals and need to make clear to them any limitations on your role. Many times, that will mean advising them that your client is their employer, not them; that your first loyalty runs to their employer, not them; and that in the event of a conflict between them (assuming they have become individual clients) and the organizational client, you and your firm will withdraw from representing them, the employee, but will continue representing the employer to the extent the ethical rules allow.

Fourth, you generally can’t communicate with people who you don’t represent but who have counsel. You must normally ask for the other lawyer’s consent first. Most times you won’t get it.

Finally, witnesses who don’t have any counsel at all have some important protections. You generally mustn’t imply to them that you are disinterested, should accurately describe your role in the matter, and should avoid offering legal advice (other than the advice to secure counsel) if the witness’s interests may conflict with your client’s. See, e.g., Tex. Disc. R. Prof. Conduct 4.3; ABA Mod. R. Prof. Conduct 4.3.

Privilege.

“An attorney enjoys extensive leeway in preparing a witness to testify truthfully, but the attorney crosses a line when she influences the witness to alter testimony in a false or misleading way.” Ibarra v. Baker, 338 Fed. Appx. 457, 465 (5th Cir. 2009). “Experienced trial counsel are expected to do no less than to provide support, direction and assistance to witnesses, provided only that a direction of what may be said is not suggested or required.” Haworth v. State, 840 P.2d 912, 914 n.3 (Wyo. 1992). Stating the point even more obviously, lawyers may not coach a witness “to modify or completely change his testimony in material ways.” Anderson v. Nat’l Union Fire Ins. Co., 88 Mass. App. Ct. 1117 (2015), vacated on other grounds, 67 N.E.3d 1232 (Mass. 2017).

“The attorney-client privilege protects most of the preparation activities directly involving the client; the work-product privilege protects the lawyer’s own efforts, including research, investigation, and contacts with other witnesses.” John S. Applegate, Witness Preparation, 68 Tex. L. Rev. 277, 292 (1989). But the “protection afforded opinion or core work product may be breached when there is a charge of falsified testimony.” In re Cendant Corp. Securities Litig., 343 F.3d 658, 666 n.8 (3d Cir. 2003).

In general, work product “protection also extends to non-attorneys who assist in preparation of litigation”, and “the litigation consultant’s advice to a witness is an ‘opinion’ that is protected under the work-product doctrine.” Hynix Semiconductor Inc. v. Rambus Inc., No. CV-00-20905, 2008 WL 397350, at *2 (N.D. Cal. Feb. 10, 2008) (citing Cendant, 343 F.3d at 665-66).

“Litigation consultants retained to aid in witness preparation may qualify as non-attorneys who are protected by the work product doctrine.” Cendant, 343 F.3d at 665 (holding that work product doctrine protected communications among trial consultant Dr. Phil McGraw, a witness, and the witness’s counsel).

“The work-product protection continues to adhere where the non-client shares a financial or legal interest, for example, as parties to a joint defense agreement.” Hynix, 2008 WL 397350, at *2.

Questions that a court might allow include “whether [the witness] met with a jury consultant, the purpose of any such meeting, who was present, the duration of the meeting and whether the witness practiced or rehearsed his or her testimony.” Hynix, 2008 WL 397350, at *4.

* * * *

In the next post, we’ll start getting into particulars of preparing the DW to testify at trial.

The number of companies that can bring treble-damages claims against drug manufacturers for violating federal antitrust law has dwindled. The scarcity has grown so acute that last week it crossed an existential threshold.

For the first time ever, a federal judge in Philadelphia ruled that a class of direct pharmaceuticals purchasers did not meet the “numerosity” requirement of Rule 23(a)(1) for class-action treatment. See “Pharma Buyers Too Few for Class“.

The ruling may portend an end to similar class actions. With billions in treble damages at stake, the two dozen or so direct purchasers that once passively relied on class actions to recoup overcharges may have to rouse themselves.

Their ability to do so successfully will depend largely on the feasibility of pursuing the same claims on a non-class basis. What does the available evidence suggest?

“It does not appear that anyone has undertaken and published a comprehensive empirical study that analyzes and quantifies the financial success of opt-out plaintiffs.” Charles H. Samel & Cori Gordon Moore, “Whether to Opt Out of Antitrust Class Actions: A Four-Step Checklist,” Corporate Counsel, May 26, 2015. Some examples are nonetheless available

Vitamins (2.28X). A price-fixing case by direct purchasers against a cartel of vitamins manufacturers yielded a class settlement totaling $1.17B. After the district court preliminarily approved the global pact, class members representing 75 percent of vitamins purchases opted out of the class.

They did well. “The opt-outs reaped more than $2 billion in settlements, driving down the size of the class settlement to about $300 million.” Krysten Crawford, “No More Mr. Nice Guy,” Corporate Counsel, June 1, 2004. The opt-outs thus took home roughly 2.28 times what they would have if they had stayed in the class and accepted their pro rata share of the initial class settlement ($2 billion ÷ [$1.17 billion x .75] = 2.28).

Methionine and Lysine (3X). A pair of price-fixing cases against Archer Daniels Midland accused it of fixing prices on two animal feed additives, methionine and lysine. The conspiracies generated criminal charges, guilty pleas, and a movie, The Informant! Quaker Oats opted out “and recouped three times the amount it would have pocketed as a class member”. Id.

Linerboard (largeX). The class claims against 12 linerboard makers settled for an aggregate of $202,572,489, an average of $2,500 for the 80,000 class members. Brandon J.B. Boulware & Jeremy M. Shur, “Opting Out of an Antitrust Class Action: Should Your Company Do It and, If So, When?,” The Antitrust Counselor, Dec. 2011. A group of 13 opt-outs reported settling with just one defendant, Weyerhaeuser, for $25 million, nearly $2 million apiece. Id.

So?

These anecdotes suggest that opt outs can do materially better by opting out than they could if they remain a passive class member in an antitrust class action. They also indicate that even if class actions become infeasible because of dwindling numbers among direct purchasers, individual cases may fill the gap, averting loss of opportunities to recover billions into in compensation for overcharges.

As yours trulynoted about the Third Circuit’s remand of the case in “No Class?“:

If the decision [on class certification] goes the defendants’ way, it will transform litigation of price-fixing claims against pharmaceutical makers. No longer will wholesalers have the ability to benefit from class settlements as passive class members. (AmerisourceBergen, for example, reported that it received more than $250 million from “antitrust settlements” since 2014.) The wholesalers must either forego recoupment of billions of dollars in overcharges or bring claims against their suppliers.

Since 2013, pay-for-delay antitrust cases against Big Pharma could succeed if they alleged that a brand-name drug company had made “large and unjustified” payments for a competitor to postpone bringing a generic substitute to market. FTC v. Actavis, Inc., 133 S. Ct. 2223, 2237 (2013). But how “large” and how “unjustified” does Actavis require the payments to be?

A new decision by the Third Circuit provides a plaintiff-friendly answer, one that allows claimants in many cases to move beyond the pleading stage into discovery and potentially trial on the merits.

Lipitor and Effexor

The appeal combined review of separate dismissals by one U.S. District Judge, Peter G. Sheridan in Trenton, of two different cases.

Both suits involved blockbuster drugs. One dealt with Lipitor, a lipid-lowering agent that helps treat cardiovascular disease ($5.27B in 2010 sales), and the second concerned Effexor, a treatment for depression, anxiety, and other mental ailments ($1.43B in 2010 sales).

The Lipitor case pitted Pfizer against Ranbaxy. Pfizer had claimed that two patents covered Lipitor. The pharmaceutical behemoth sued Ranbaxy for infringing the patent (in the District of Delaware) after Ranbaxy gave notice it would start selling a Lipitorgeneric.

Expanding the fight, Pfizer also accused Ranbaxy (in the District of New Jersey) of infringing patent rights in another Pfizer drug, Accupril, which reduces hypertension. In the Accupril case, Pfizer moved for and got a preliminary injunction against Ranbaxy, posting a $200M bond as security.

But in June 2008, Pfizer and Ranbaxy settled, with Pfizer releasing claims for damages from infringement of the Accupril patent and Ranbaxy agreeing not to start selling generic Lipitor until November 2011 — 20 months after Pfizer’s original Lipitorpatent expired.

Under the Hatch-Waxman Act, because Ranbaxy had made the first certification to the Food and Drug Administration that it intended to sell a Lipitorgeneric, other generic makers had to wait 180 days after November 2011 to begin selling their generic Lipitor.

The Effexor litigation followed a similar path. Wyeth owned patent rights in Effexor’s active ingredient, and in 2002 it brought a patent-infringement suit against Teva over Teva’s plans to market a generic Effexor. The case settled after the court made rulings in a Markman hearing. Teva promised not to begin selling its generic until July 2010, and Wyeth agreed not to offer a generic version of Effexor until Teva’s exclusive period ran out 180 days later.

Judge Sheridan dismissed both cases because he believed that Actavis required the plaintiffs to do more than generally allege “large and unjustified” payments for delay of generic entry. He ruled that plaintiffs must also anticipate and rebut possible arguments could call the largeness and unjustified nature of the payments into question.

Third Circuit

The court of appeals disagreed. Regarding the “large” part of the “large and unjustified” test, the 3-0 panel (consisting of Chief Judge Smith and Judges Ambro and Fisher) pointed out that the Lipitor complaint alleged that Pfizer released a claim against Ranbaxy for infringing its Accupril patent “worth ‘hundreds of millions of dollars.'” In re Lipitor Antitrust Litig., No. 14-4202, slip op. at 59 (3d Cir. Aug. 21, 2017). “Those allegations sufficiently allege a large reverse payment; more detailed, advanced calculations related to those allegations may come later.” Id. (footnote omitted).

The panel rejected Pfizer’s demand for more. Chief Judge Smith wrote:

As explained infra, not only does Lipitor defendants’ request for detailed economic analyses go beyond what is required at this stage of the litigation, but that request also attempts to require Lipitor plaintiffs to disprove what Lipitor defendants must prove. Lipitor defendants suggest that the size of the reverse payment must be determined by the net reverse payment, which accounts for litigation costs and other discounting measures and justifications for the payment. In doing so, Lipitor defendants seem to conflate the Actavis requirement that the reverse payment be “large” with the requirement that the payment be “unjustified.” Their proposed economic valuation demands that Lipitor plaintiffs disprove proffered justifications for the reverse payment settlement agreement. Lipitor plaintiffs, though, need not do so at the pleading stage. Actavis, 133 S. Ct. at 2236.

The also denied Pfizer’s attempt to complicate the pleading of the second half of the “large and unjustified” test:

The alleged reverse payment here was also “unjustified.” As noted earlier, avoiding litigation costs, providing payment for services, or other consideration may justify a large reverse payment. See Actavis, 133 S. Ct. at 2236. To plausibly allege an unjustified reverse payment, an antitrust plaintiff need only allege the absence of a “convincing justification” for the payment. Id. at 2236–37.

While Lipitor defendants speculate as to the actual saved litigation costs, all that need be alleged, at this juncture, is that those costs fail to explain the hundreds of millions of dollars of liability released by Pfizer. Lipitor plaintiffs have alleged just that, and the finely calibrated litigation 61 cost estimates requested by Lipitor defendants and the District Court are unnecessary at this stage in the litigation.

Actavis does not require antitrust plaintiffs to come up with possible explanations for the reverse payment and then rebut those explanations in response to a motion to dismiss. The Supreme Court clearly placed the onus of explaining or justifying a large reverse payment on antitrust defendants.

Wyeth fared no better in the Effexor part of the appeal. The court ruled:

First, the alleged reverse payment, here in the form of Wyeth’s no-AG agreement, is plausibly large. The no-AG agreement [i.e., the agreement not to sell an authorized Effexor generic] used by Wyeth to induce Teva to stay out of the Effexor XR market was alleged to have been worth more than $500 million.

* * * *

Second, the alleged reverse payment made through Wyeth’s no-AG agreement is plausibly unjustified. As alleged, the no-AG agreement “cannot be excused as a litigation cost avoidance effort by Wyeth.” Effexor JA212 (DPP Sec. Am. Compl. ¶ 285). Effexor plaintiffs’ complaint states that Wyeth’s litigation costs with Teva would have totaled only between $5 million to $10 million, and those costs “would have been the tiniest of a fraction the size of the payment likely over $500 million effectuated by Wyeth to Teva.” Id. They allege further that the no-AG agreement is not “justified on any procompetitive basis,” asserting that no exchange of goods or services or any explanation justifies the delay of Teva’s entry into the Effexor XR market other than the settlement agreement. Effexor JA212 (DPP Sec. Am. Compl. ¶¶ 286–87).

The Third Circuit’s decision in Lipitor emphasizes the simplicity of the “large and unjustified” test under Actavis at the pleading stage. Plaintiffs need not preemptively respond to defense arguments that could undermine the payments’ size or lack of justification. Pay-for-delay cases should thus ordinarily survive motions to dismiss in cases involving blockbuster drugs, which generate hundreds of millions if not billions of dollars in revenue.

Big Pharma will still have a chance to present their justifications at summary judgment, as they did successfully in another recent Third Circuit case. See In re Wellbutrin XL Antitrust Litig., No. 15-2875 (3d Cir. Aug. 9, 2017) (affirming summary judgment against plaintiffs on pay-for-delay claims).

If you’ve ever felt that Uber costs more than it should, you can forget about fixing that in court. Under a new ruling by the Second Circuit, no matter how good your claim and regardless of how much money it involves, Uber can beat you every time.

Every. Single. Time.

Price-fixing case

Spencer Meyer lives in Connecticut. He’s used the Uber app on his Samsung smartphone many times. He took Ubers not only in the Nutmeg State but also in New York City.

But something bothered him. In December 2015, he filed a complaint against Uber co-founder Travis Kalanick in the U.S. District Court for the Southern District of New York. He alleged that Kalanick violated federal and state antitrust law by orchestrating a conspiracy among Uber drivers to charge the (higher) fares computed by the Uber algorithm.

Kalanick moved to dismiss the price-fixing claim. He urged that it was implausible that Uber drivers conspired among themselves and with Uber.

Judge Rakoff denied the motion. He ruled that Meyer plausibly alleged a price-fixing agreement among Kalanick, Uber, and Uber drivers to charge supra-competitive prices. He wrote:

In this case, plaintiff has alleged that drivers agree with Uber to charge certain fares with the clear understanding that all other Uber drivers are agreeing to charge the same fares. See Amended Complaint ¶¶ 70-71. These agreements are organized and facilitated by defendant Kalanick, who as at least an occasional Uber driver, is also a member of the horizontal conspiracy. See id. ¶¶ 76, 84.

Kalanick next asked Judge Rakoff to let Uber in as a defendant. Uber also moved to intervene. It attached to its intervention papers a motion to compel Meyer to arbitrate. The motion to compel cited Uber’s online Terms of Service. The Terms of Service included a section on Dispute Resolution. The section provided:

You acknowledge and agree that you and Company are each waiving the right to a trial by jury or to participate as a plaintiff or class User in any purported class action or representative proceeding. Further, unless both you and Company otherwise agree in writing, the arbitrator may not consolidate more than one personʹs claims, and may not otherwise preside over any form of any class or representative proceeding.

Judge Rakoff allowed Uber into the case and took up its motion to compel arbitration. He wrote:

Since the late eighteenth century, the Constitution of the United States and the constitutions or laws of the several states have guaranteed U.S. citizens the right to a jury trial. This most precious and fundamental right can be waived only if the waiver is knowing and voluntary, with the courts “indulg[ing] every reasonable presumption against waiver.” Aetna Ins. Co. v. Kennedy to Use of Bogash, 301 U.S. 389, 393 (1937); Merrill Lynch & Co. Inc. v. Allegheny Energy, Inc., 500 F.3d 171, 188 (2d Cir. 2007). But in the world of the Internet, ordinary consumers are deemed to have regularly waived this right, and, indeed, to have given up their access to the courts altogether, because they supposedly agreed to lengthy “terms and conditions” that they had no realistic power to negotiate or contest and often were not even aware of.

Meyer v. Kalanick, No. 15-cv-9796, slip op. at *1 (S.D.N.Y. July 29, 2016). Concluding that Meyer did not have enough notice of the arbitration clause, Judge Rakoff denied the motion to compel.

On to the Second Circuit

Kalanick and Uber appealed.

Last week, the Second Circuit vacated Judge Rakoff’s ruling. The panel held that, as a matter of law, Meyer had bound himself to arbitrate any disputes with Uber and Kalanick. Applying California law, the court concluded that “Meyer was on inquiry notice of the arbitration provision by virtue of the hyperlink to the Terms of Service on the Payment Screen and, thus, manifested his assent to the agreement by clicking ‘Register.'” Meyer v. Uber Technologies, Inc., No. 16-1750-cv, slip op. at *21 (2d Cir. Aug. 17, 2017).

Did you get that? Because the screen on Meyer’s Samsung Galaxy S5 showed a hyperlink to the Terms of Service, because he could have clicked on the hyperlink and viewed the online Terms of Service, and because he could have scrolled through the Terms of Service to the Dispute Resolution section and read the arbitration agreement in it, he “was on inquiry notice” and therefore, as a matter of contract law and the federal Arbitration Act, he had therefore waived his right to a jury trial and the right to put himself forward as a representative of a class of Uber users seeking compensation for alleged price-fixing.

What it means

The Second Circuit’s decision in Meyer v. Uber Technologies, Inc. dispenses with any sense that the Arbitration Act entitles consumers to more than a trivial chance to reject a waiver of constitutional and procedural rights. Faithfully applying the letter and logic of two decades of increasingly business-friendly Supreme Court rulings, the panel held that having a hypothetical momentary chance to notice and click on a hyperlink forfeits your right to seek a collective remedy before a jury.

As I’ve noted more than once,* the forfeiture has has startling real-world consequences. A case that I had against AT&T involved an arbitration agreement that covered customers in every state except California. AT&T successfully moved to compel arbitration as to all class members who lives outside of the Golden State. Although the jury found that Ma Bell had overcharged all its U.S. customers a total of $160 million, AT&T paid only 10 percent of that amount (the proportion attributable to California customers). Because the arbitration clause also banned class arbitration, getting an effective remedy for the non-Californians in arbitration was not possible. The Arbitration Act thus saved AT&T $146 million (plus interest) that the jury found it owed! See In re Universal Service Fund Telephone Billing Practices Litig., 619 F.3d 1188 (10th Cir. 2010).

Last chance

But Meyer still has a chance. Kalanick, he urged, had waived his right to compel arbitration by, among other things, moving to dismiss his complaint and pursuing discovery. As the panel noted:

Because Meyerʹs waiver argument is based on defendantsʹ defense of this litigation in the district court, we conclude that is a question for the district court rather than an arbitrator. Accordingly, we remand the case to the district court to consider in the first instance whether defendants have waived their right to arbitrate.

]]>https://www.thecontingency.com/2017/08/uber-detours-price-fixing-case/feed/0https://www.thecontingency.com/2017/08/uber-detours-price-fixing-case/Dieselgate — Antitrust Editionhttp://feeds.lexblog.com/~r/TheContingency/~3/WnQv-_OEX4I/
https://www.thecontingency.com/2017/07/dieselgate-antitrust-edition/#respondMon, 24 Jul 2017 05:02:57 +0000http://www.thecontingency.com/?p=7246Continue Reading]]>You will recall that two years ago Volkswagen got in $14.7 billion worth of class action trouble for rigging software in its diesel cars to fake compliance with U.S. emission standards. The

We now learn that Volkswagen didn’t act alone.

Something rotten in Stuttgart

The German weekly news magazine Der Spiegel revealed over the weekend that, starting in 2006, Volkswagen teamed up with its Teutonic rivals BMW and Mercedes-Benz (Daimler) to avoid competing for customers.

Der Spiegel points particularly to the car makers’ savings of 80 Euros ($93) a vehicle from an agreement to limit the size of tanks holding the juice (mostly urea) allowing the emissions system to neutralize the nasty nitrogen oxide (NOx) that diesel engines emit. As a result, the cars had too little urea to knock out all the NOx. And that in turn made the software cheat necessary in order to obscure the vehicles’ failure to meet NOx emissions standards.

As Forbes wryly points out, when “you make 10 million cars a year, those 80 Euros quickly turn into real money.”

The agreements of German car manufacturers are likely to form one of the largest cartel cases in German industrial history. They began in the 1990s and were extended to more and more subjects, probably because offenses against competition law in the [early] days were regarded as rather harmless rule violations, comparable to wrong parking.

The cartel came to light when Volkswagen turned itself in a few weeks ago. The company, which also owns Audi and Porsche, had turned over documents to Germany’s Federal Cartel Office in connection with an investigation of the steel industry. Der Spiegel notes:

Volkswagen itself then searched through all the documents that could be in this context and made them available to the cartel guards in Brussels and Bonn. This was by no means due to insight or remorse. The company wanted to take advantage of its last chance to get as far out of the matter as possible – by betraying everything and whistling the old partners.

(I guess “cartel guards” refers to antitrust enforcers and “whistling the old partners” means blowing the whistle on them.)

But the Mercedes-Benz folks also clamored to confess. Noting that which one begged for mercy first will determine which of them gets more lenient treatment, Der Spiegel concludes that in “this case, Daimler and Volkswagen are now competing with each other.”

Bwa-ha-ha.

What happens next

In the coming days, we will likely see a deluge of cases against Audi, BMW, Mercedes-Benz, Porsche, and Volkswagen.

They will at first mainly consist of putative class actions by individual owners of diesel cars and light trucks. Those cases will principally seek damages under state antitrust, consumer protection, contract, and unjust enrichment laws, but they may also request injunctive relief under federal antitrust law. Indirect purchasers like them do not have standing to,sue for damages under the federal Sherman Act.

Actions by dealers and other direct purchasers of Audi, BMW, Mercedes-Benz, Porsche, and Volkswagen vehicles will proceed under section 1 of the Sherman Act. These cases typically have the most value but take longer to develop and organize. Dealers have ongoing relationships with the manufacturers and tend to take a more circumspect approach to joining in litigation.

A big question will concern in which venue the dozens of cases from around the country will end up. That decision will fall to the Judicial Panel on Mulidistrict Litigation. Within several months, it will rule on which U.S. district court and which district judge to send the actions for pretrial proceedings.

The Panel chose Judge Charles Breyer in San Francisco for the fraud cases against Volkswagen. It may select him as well for the antitrust cases.

But the antitrust claims will have a broader scope. They won’t involve only the cheating on emissions. Per Der Spiegel, it will deal with a long-standing cartel that met hundreds of times and engaged in a variety of anticompetitive conduct.

The difference in focus and scope may prompt the Panel to transfer the cases to another district.

Candidates will likely include the Northern District of Georgia, U.S. headquarters of Mercedes-Benz and Porsche; the District of New Jersey, the U.S. Home of BMW; and the Eastern District of Virginia, where Volkswagen and Audi hang their American corporate hats.